Correlation Between Aberdeen Small and Small Company
Can any of the company-specific risk be diversified away by investing in both Aberdeen Small and Small Company at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aberdeen Small and Small Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aberdeen Small Cap and Small Pany Growth, you can compare the effects of market volatilities on Aberdeen Small and Small Company and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aberdeen Small with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Small and Small Company.
Diversification Opportunities for Aberdeen Small and Small Company
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Aberdeen and Small is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Small Cap and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Aberdeen Small is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aberdeen Small Cap are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Aberdeen Small i.e., Aberdeen Small and Small Company go up and down completely randomly.
Pair Corralation between Aberdeen Small and Small Company
Assuming the 90 days horizon Aberdeen Small is expected to generate 1.98 times less return on investment than Small Company. But when comparing it to its historical volatility, Aberdeen Small Cap is 1.54 times less risky than Small Company. It trades about 0.13 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,131 in Small Pany Growth on September 3, 2024 and sell it today you would earn a total of 538.00 from holding Small Pany Growth or generate 47.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aberdeen Small Cap vs. Small Pany Growth
Performance |
| Timeline |
| Aberdeen Small Cap |
| Small Pany Growth |
Aberdeen Small and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aberdeen Small and Small Company
The main advantage of trading using opposite Aberdeen Small and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Small position performs unexpectedly, Small Company can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Small Company will offset losses from the drop in Small Company's long position.| Aberdeen Small vs. The Hartford Midcap | Aberdeen Small vs. Mfs Emerging Markets | Aberdeen Small vs. Wells Fargo Special | Aberdeen Small vs. Washington Mutual Investors |
| Small Company vs. Mid Cap Growth | Small Company vs. Growth Portfolio Class | Small Company vs. Morgan Stanley Multi | Small Company vs. Emerging Markets Portfolio |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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